Professional investors are disciplined about monitoring and managing their risks daily. They adjust portfolios to manage risk as positions, cash and markets change. Managing risk properly is critical to ensuring that portfolios stay on course to achieve client goals.

How do your advisors recognize an opportunity to rebalance?

A common and accepted practice among wealth managers and their advisors is to use a target asset allocation, based on some measure of risk appetite, as a benchmark for client portfolios. As markets change and the values of specific holdings fluctuate, the asset allocation within client portfolios may deviate from intended targets, resulting in over- or under-exposure to certain risks. Rebalancing on a specific cadence (e.g. quarterly or annually) is a method many advisors use to bring portfolios back in line.

But when markets make big moves, portfolios can drift meaningfully in a short period of time. This drift can quickly result in client portfolios going off track and steering away from client goals. Take the recent market downturn and subsequent recovery of Spring 2020 as an example. These shifts surprised many investors, and a 60/40 portfolio on December 31, 2019 could easily have looked more like a 55/45 portfolio by the end of March 2020.

Coronavirus model portfolio rebalance January to March 2020

And when markets recovered, a 60/40 portfolio on March 31, 2020 could easily have looked more like a 65/35 portfolio by the end of the following June.

Coronavirus model portfolio rebalance March to June 2020

Advisors who can stay on top of asset allocation drift can do a better job at keeping clients aligned with their goals. Identifying which portfolios to rebalance and proactively communicating that can deepen relationships and grow wallet share, particularly in troubling times.

Alert your advisors when portfolios may need attention

The Aladdin Wealth platform offers an efficient mechanism to provide advisors with greater transparency when portfolio allocations drift due to market volatility and other reasons. Firms can create rules and alerts to systematically identify portfolio deviation across their entire book of business in order to help advisors bring outliers back in line with intended goals and investment guidelines. 

This makes it easy for advisors to target the right households and accounts, implement timely changes, improve their conversations with clients and ultimately drive new revenue.

Show clients their portfolios and goals are aligned

Using the Aladdin Wealth platform, advisors can generate portfolio and risk insights that easily show clients the impact of proposed adjustments to their portfolios and reinforce how advisors are keeping each client’s financial future on track. Ensuring that risks taken are intended and appropriate helps build better portfolios and better client engagements.

Catch the drift

Some risks and opportunities are easy to spot, but others are not. If you’d like to talk through our most recent market and portfolio observations, or how Aladdin Wealth could work for your business needs, please reach out. We’re here to help.

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